A Beginner’s Guide to the Stock Market by Matthew R. Crater
Perhaps, seeing this title, you may ask yourself what is the need to read a book like “Beginner’s Guide to the Stock Market”?
In response, we must say that whether you are a professional investor or a beginner. the basic principles are always and always important.
Because the whole capital market rises on them. The beginner investor account is separate. but even if you are a professional investor, be sure to pay attention to these basic concepts every now and then.
Be sure to learn a lot more the first time you read them. In this part, we go to the book “Beginner’s Guide to the Stock Market” by “Matthew R. Crater”. If you are still hungry for information from an experienced financial market investor, stay with us until the end of this section.
The stock market is a treasure of new opportunities
You are reading The Beginner’s Guide to the Stock Market. This means you care about your own education and you don’t want to blindly risk your capital.
We give you this good news that you can count on hidden opportunities in this market to make yourself rich. It doesn’t matter whether you are a risk taker or a calm person. who is away from excitement and wants to get rich in peace.
No matter what type you are. there are so many opportunities to get rich in the stock market that you can take advantage of them without worry.
The key in this story, what separates your account from the rest of the failed traders.
is the mastery of the mechanism of this market. People who fail in this market do not master the basic principles and mechanism of this story.
They call the stock market a capital-eating monster. Because they could not change this market in their favor by shouting and jumping up and down. Remember, the stock market is not something you or anyone else can change. It is you who should change your position according to its changes!
Examining some basic and very important concepts of Stock Market
We said together that mastering basic concepts is very important.
Therefore, at the beginning of the beginner’s guide to the stock market.
we will review and explain some of its basic concepts in simple language.
Don’t feel bad about learning or revising these concepts or even seeing the word “beginner” Because you are 100 to zero ahead of those who don’t know and don’t feel the need to learn. and put all their capital into the game designed by others! With this explanation and encouragement, we start our work:
What exactly is a stock?
Each share is a very small part of the ownership of a company.
By buying stocks, you indirectly become the owner of large and small companies. The more cash you have and the more shares of a company you can buy.
the bigger part of a company you can own!
Even if you continue to do so, you may end up with a seat on that company’s board of directors!
The concept of share can be explained in another language. If we consider companies as a big cake or pizza.
every piece of this pizza will be a share of that company.
What is Stock Market value?
Each share has a price. When we know the price of that share and multiply it by the total number of shares that the company consists of, we get something called “market value”.
We continue our work in the beginner’s guide to the stock market by scrutinizing the story of why share prices change.
If you have heard the economic news, you more or less know that stock prices do not remain constant and change over time.
Following a change in the price of a share, the total market value of that company also changes. This change is due to information and good and bad situations or even rumors that are circulating around a company.
For example, consider Apple, which was losing its market value after Steve Jobs left. Then Steve returned to the company and introduced new products, increasing Apple’s market value again. Interestingly, as time passed and people became more familiar with the positive and useful features of these products, the stock price and market value of Apple increased.
Why does the stock market fluctuate?
The capital market is constantly updating itself with the new information it gets from the companies. This update causes a change in the price of each share and then the market value of a company. In the stock market, as in other markets, these laws of supply and demand are in control.
In this way, if many people are looking to buy a special share, its price will go up, and if many people want to sell the shares of a company, the price of that share will decrease. Of course, this was just an example.
Because maybe a person who owns a lot of shares of a company, by deciding to sell shares, causes its price to decrease.
The Stock Market looks to the future
In this section of the “Beginner’s Guide to the Stock Market”, we point out an interesting point that most professional investors do not pay attention to.
The point is that the stock market and the prices it displays are not the result of past events in the market, but are a reaction to predicting the performance of companies in the future.
In this way, the market speculates by examining the information about the growth or fall of companies.
If he determines that a company will grow over the next few months, he will raise its price, and if he determines that a company will not have a good time in the near future, even if the current state of the company is good, he will lower its price!
Where to buy stocks? Beginner’s Guide to the Stock Market
Now we come to the more interesting part of the beginner’s guide to the stock market. In this step, we want to take some money and convert it into stocks, but how? Just as you go to the market to buy the device you want, to buy stocks, you have to go to the special stock market, that is, the stock market.
In this market, different companies are lined up like shopkeepers and have put their shares for buying and selling.
On the other hand, buyers are also people with different thoughts. Some of them want to buy the share and hold it for a few years. These people are called “investors”.
There are others who don’t have the patience to wait and want to sell their shares after a little price growth and use the profit, these people are “traders”.
Should we be traders or investors A Beginner’s Guide to the Stock Market
It doesn’t matter whether we are traders or investors; Because the stock market is a platform of different opportunities for all people with any amount of capital. In fact, there is no such thing as the best or worst way to invest. What matters is the way you look at investing, how much you know yourself, and your internal capacity to thrive or endure change.
You can be an investor in one share and work as a trader in another share at the same time. In this story, like 99% of other things in this world, there is no good or bad, no right or wrong.
Find a good and suitable brokerage for you
In the beginner’s guide for the stock market, we must mention another important point; That you cannot work in this market directly and without intermediaries as a real person.
All people need an intermediary organization called “brokerage” where they can operate in the stock market through the lens of that brokerage by opening an account.
Maybe you want to know what brokerages get in return for providing services to investors?
The answer is that brokerages work by taking commissions from the money you have in your brokerage account. With this account, finding a reliable brokerage that charges lower fees and provides better services in return is one of the first things you should do before entering the capital market.
Stay away from non-floating stocks as much as you can when trading!
Here is a beginner’s guide to the stock market; So before we explain to you the reason for this offer, we need to understand what are free or non-free floating shares?
A free-floating stock is a stock that you can buy more easily without worrying about wild price fluctuations.
When buying these shares or even non-free floating shares that are associated with a lot of volatility, you can make your purchase in two ways, which we will explain below.
Order At Market Price And Limit Order
Two ways to buy a share In the continuation of the beginner’s guide for the stock market, we come to two important methods in buying or selling orders.
In the first case, you can place your order at the “market price”; Buying or selling does not matter. In this case, your brokerage will buy that share for you at any price; So sometimes you will see a huge difference between the price you paid and what you had in mind. Usually this type of order is for when you are in a hurry to own or get rid of a stock.
In the second case, you can use the “limit order” method. In this way, you are not willing to buy or sell at any price; Therefore, the broker can only buy or sell your shares when they reach the price you want.
Day Order or Order Without Time Limit?! Which One Is Better?
In the day order, your trading position remains open during the office hours of the same day and is automatically canceled at the end of the day, but in the order without time limit, your order remains open for a long time, maybe even months; Of course, there are some brokerages that automatically close such orders after a few days or even a month.
It’s best to research your broker’s policies before being shocked about this. In this case, being good or bad is not our problem; The important thing is, which method works for you according to your strategies?
A beginner’s guide to the stock market; Imitate Warren Buffett
In this part of the beginner’s guide to the stock market, we answer a basic question; How to make good trading decisions and start trading and investing like the greats of this market?
If you have a lot of curiosity in this field, you are probably looking for the names and addresses of top and international investors on the Internet.
At the top of this list is the name “Warren Buffett”. Every time he is asked about his investment method, he gives a very simple answer:
“Find a good company stock, buy it below its true value and don’t sell it for half a century!” On the surface, it is a simple instruction and very interesting for you who are a beginner, but in practice it is not easy at all.
You need to have a lot of deep analysis on the market and companies to be able to identify such opportunities at the right time. However, there is a much easier way, and that is to read the article that Warren Buffet publishes every year on his website, in which he writes a list of companies in which he will invest. Then imitate him!
A Better Way; Hire Warren Buffett! Beginner’s Guide to the Stock Market
Even though Warren Buffett publishes a list of his holdings on his website, there are still some who are not interested in reviewing such a limited number of companies. In The Beginner’s Guide to the Stock Market, we show you how you can hire Warren Buffett to manage your stocks.
This way is to buy Berkshire Hathaway shares. In this way, you remove yourself from the difficult and complicated story of analysis and search and let Warren Buffett and his colleagues do all this hard work and put your profit in your account!
An interesting thing to know is that Warren Buffett does not go to every company. He chooses companies to invest in that have the power to change the market and pricing, and in addition, the government is backing them! That way, even if those companies go bust, you can still protect your principal!
Beware Of Stock Market Traps
One of the investment methods that has many fans is the same method that Warren Buffett used to get rich. In his younger years, Buffett sought to buy shares of companies that were being offered for less than their true value. Then he would buy those shares and wait for them to reach their true value and even exceed it. Now the important question is whether stocks with low P/E or “price-to-earnings ratio” are still worthwhile investment options.
The answer is no. You may ask why this story worked for Warren Buffett, but now it doesn’t work for us?
It is better to know that the times and concerns that people have have changed. Currently, companies with low P/Es are either scams or too much debt to straighten out.
Always look for stocks that show income growth. Stocks with low P/Es are turning to zero!
As a result, by switching to these shares, you will pay for buying a sheet of paper with zero value, and you will be happy that you have done it cheaper than before! Please look at the stock market more cautiously.
Trade Growth Stocks
A little while ago, in the Beginner’s Guide to the Stock Market, we said that you should not go for stocks with a low P/E. Now we tell you that this is also true for stocks with high P/E.
Because there are many companies whose P/E is high not because they are earning high income, but because they are expanding their market. If we look at them from this point of view, we see that such companies cannot bring any profit to their shareholders; Because they themselves are losing money!
Our suggestion is to go for stocks whose price has been growing and bullish over a reasonable period of time, say 50 weeks. One of the ways that you can find out if a share is bullish is to check the “daily chart of that share”. Of course, there are several other things that can help us in this way:
Buying stocks with a market capitalization of $5 billion or slightly less
Buying shares whose number of floating shares is less than 20% of all outstanding shares.
Should beginners participate in the IPO?
An “IPO” or the first entry of an unlisted company into the stock market is a double-edged sword. If you know what you’re doing, you can use an IPO to make a big profit, but if you just heard that you can multiply your capital by buying IPOs, you won’t gain anything.
What is often overlooked in an IPO is that you, as an outsider, suddenly find yourself with shares of a company that people inside the same company want to sell. At this point, you should ask yourself, if this private company was in good shape, why would its investors want to share this profitability with you?
One of the possibilities that exists in this, is that they know that their company does not have a good future according to the knowledge and information they have from the heart of the company; That’s why they want to give up their share.
When To Buy IPO? A Beginner’s Guide to the Stock Market
Our advice in The Beginner’s Guide to the Stock Market is to approach IPOs with caution.
Do your best to get good information from that company. Don’t be fooled by the hype and hype that claims buying shares in a brand new company is a golden opportunity to get rich.
Pay attention to the information you get. If you come to the conclusion that the company in question is growing and the purpose of entering the stock market is to get more capital for further development and growth, you can count on buying its initial offering.
What Are The Tricks To Buying An IPO?
You can participate in IPOs using two strategies:
1- Long-term investment
Then you should correctly predict that the company will still exist and continue to grow over the next 20 or 30 years. Note that the mere existence of the initial offering does not mean the success or continuous growth of that company. In fact, many companies go out of business almost five years after their initial public offering!
2- Buying the initial supply as a short-term trader
In this case, you buy the IPO stock to take advantage of its short-term benefits, such as low float, which causes the stock to have high or even low price growth.
Six Recommendations For Day Trading Beginner’s Guide to the Stock Market
In the Beginner’s Guide to the Stock Market we come to the part where you will want to deal with the stock market as a day trader. In this case, we will introduce you to a method for day trading that has stood the test of time for years:
- Look for a stock that has a price gap A price gap occurs when the stock price suddenly rises or falls. Of course, there is a point in this, and that is that you should look for stocks that have suffered a price gap due to the release of good news.
- Wait until the market opens, then let 15 minutes pass. After this short stop, write the price of the share you want.
- Place a limit order to buy that share.
- If your order is not fulfilled within 15 minutes, cancel it.
- If your order is filled, hold the stock for the entire trading day and then look to collect your profit two minutes before the market closes.
- If your share price drops below the lowest price in the first 15 minutes of your trading, get out very soon.
- Remember that buying and selling stocks is not a complicated task and you too can become a great trader. Provided you take the beginner’s guide to the stock market seriously; It means mastering the basic principles of this market and the rules that make it up.
A summary of what we said in the “Beginner’s Guide to the Stock Market” book:
The stock market is full of active opportunities for all people of all intellectual and psychological types.
The capital market is not something you can change. The only thing you can do in this market is to choose a smart position against these changes.
Each share is a small part of the ownership of a company.
Market share is a concept that is obtained by multiplying the price of each share by the total number of shares issued by a company
The stock price does not remain constant; Because the situation of companies is not fixed. They are either growing, which causes their stock prices to rise, or they are stagnating and falling, which causes their stock prices to be negatively affected by this story.
The stock market looks to the future; So the prices you see now are not the result of a company’s past performance, but rather a prediction of its performance.
An investor is a person who takes a long-term view of his investment and does not think about today’s and tomorrow’s profits.
A trader is a person who takes a short-term view of investment and counts on daily and ultimately monthly profits.
Individuals cannot directly trade shares of companies and need a brokerage for this.
Trading with non-floating stocks is not recommended; Because they show strange fluctuations from themselves.
There are two ways to buy a share:
“market order” and “limit order”. Our recommendation in the beginner’s guide to the stock market is the limit order; Because it allows you to close the share you want at the price you want.
Every year, Warren Buffett publishes an article in which he publishes a list of companies whose shares he will trade. You can use this list to follow Warren Buffett’s thought process.
By buying Berkshire Hathaway shares, you can use Warren Buffett’s knowledge for profit and stand aside.
Buying stocks that are not worth much now, but you think will become valuable in the future, was a view that Warren Buffett used in the past; Even he himself does not use this method now!
Success in making a profit by buying IPO stocks depends on how smart you are and how much you trade.
